7 months ago
SACRAMENTO, CA -- The presses are now printing IOUs at the State Capitol. The first round includes more than $53 million dollars in IOUs to social service, mental health agencies, Cal Grant students, and people expecting tax refunds.
The IOUS are a result of legislators' failure to come up with a budget fix by the time the new fiscal year began on July 1.
The state controller's office said many banks may not honor the IOUs. Bank of America, Tri Counties Bank and Chase have announced they will honor the IOUs, but only until July 10.
People receiving the registered warrants do have some hope, though, that they could end up with the ability to give them back to the state.
Republican Assemblyman Joel Anderson is proposing a law that would require the state government to accept its own IOUs as payment for state taxes, car registration fees, or other fees owed to the state.
"When you're thinking in terms of credit worthiness, and we're talking about whether the state has credit and whether Wall Street believes we have credit, our first task is going to be in B and P," said Anderson, "Because if the state's not willing to take back its own IOU, then why should anybody else accept it?"
That bill, AB1506, is scheduled for a hearing in the Assembly Business and Profession Committee next Tuesday, July 7.
"The most important part about this is that it would also help to protect jobs," said Gloria Freeman, who owns a business in Rocklin and is expecting an IOU. "I already laid off employees. I may have to lay off more. And so if we don't get this part, this part of the bill passed, then there could be more jobs impacted."
It isn't only local businesses that could get shafted with IOUs. The state could end up sending them to the U.S. government for programs the state is supposed to partially pay for, such as federal programs for the elderly and developmentally disabled.
Wednesday, Gov. Schwarzenegger declared a fiscal emergency and ordered lawmakers to forego other legislative business until the budget problem is fixed.
California last issued IOUs, otherwise known as registered warrants, in 1992. The state will have to pay interest on those warrants and the state treasurer said that could hurt California's credit rating.
If that happens, it could cost the state $3.4 billion in higher interest rates over the next 30 years.
News10/KXTV
